Wearing a bright red tie – which may signal his conservative approach to fiscal management – South Africa’s new Finance Minister, who insists on being called Governor Tito Mboweni “the eighth governor” signalled that he wasn’t going to tolerate “heists” of any kind, he doesn’t think much of land expropriation without compensation and believes South Africa is at a fiscal crossroads. He also believes that South Africans should be “open minded” about equity partners in some state-owned enterprises. Donwald Pressly was at the Medium Term Budget Policy Statement press conference.
By Donwald Pressly*
If “the Governor” has his way, fiscal management will make a turn for the better in the years and months ahead. He clearly has his doubts about land expropriation without compensation. Apart from the fact there is little change in the land reform vote in the medium term, he made a remark that he would rather like to keep his own farm – in Limpopo. His views of land reform came out when he mentioned that farms which had been handed to new recipients in his home province of Limpopo had turned back into forests. He implied that this should not be allowed to happen.
But he was most open minded about structural change at state owned enterprises. There had to be a reconfiguration of “state-owned enterprises… it means that (we) should be open minded, inviting equity partners” to be part of the deal. He specifically spoke about changes to the power delivery component into the national grid being supplied by more and more independent power producers. He also hinted that there should be more than one part involved in power redistribution.
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On the embattled South African Airways, he said SwissAir had been reconfigured into a private ownership structure now called Swiss International. He specifically said that South Africa’s mindset on the matter of state-owned enterprises could not be stuck “in the 50s”. There must be progress in thinking “towards the Wifi generation”. It implied that some sort of equity partner – or perhaps even privatisation – of SAA should be considered.
He compared public servants to deciding how many avocados to buy for a household. One may normally want a whole clutch of avocados but one realised one could do and still stay alive with one or two avocados. Likewise with the public service, South Africa was spending too much of its budget – about 36 percent on public service salaries. “These are human beings that have houses, (mortgage) bonds, children at school… they must eat and so on.” However, government would have to be tough in the negotiations ahead to bring down the cost of employee compensation – as it is called in the Medium Term Budget Policy Statement documents. These documents point out that “compensation” has grown from 32 percent of total spending in 2006/07 to 35.2 percent in 2017/18 “putting pressure on goods and services and capital investment”. It also notes that the 2018 public service wage agreement “exceeds budgeted baselines by about R30.2 billion”. The budget document promised that government “is working on options to manage these pressures over the medium term”. Mboweni, who pointed out that he had been Labour Minister in the first Mandela government, said negotiations about the public service wage bill “require huge negotiations with the trade Union movement”. He had learnt as labour minister that one could not do things unilaterally “… you have to negotiate”.
Asked a political question about the cabinet size – which had grown to about 70 including deputy ministers in an extended executive under former President Jacob Zuma – Mboweni said this issue was obviously not the domain of the Treasury. It was President Cyril Ramaphosa’s prerogative to reshuffle or cut the size of the executive management team. But, he said: “If you ask me about the size of the cabinet… it (would) be preferable not (to be) more than 25 (ministers), probably 20.”
Asked how he worked with such people as former Social Welfare Minister Bathabile Dlamini and ANC secretary general Ace Magashule, Mboweni did not comment on any individuals. But what he did say was that he was “familiarising” himself with the political environment, including the national executive committee of the governing party, the African National Congress, and serving in the cabinet again. “One of the things I will try … to provide is political protection to the national Treasury … to the extent that it is naively possible.” He did emphasise that this was near impossible as revenue collection and allocation – which was the job of the treasury – “is a highly political thing”. He was trying to be inclusive, having met with ANC officials, DA officials and others. He said Treasury conversations with the political leadership of the country would continue even when matters turned out good. He acknowledged in the MTBPS documents that South Africa was at a fiscal and economic crossroads.
It was clear from Mboweni and acting SARS Commissioner Mark Kingon that government is concerned that it should get money back into the economy. Some R20 billion would be getting back to businesses in VAT rebates. Kingon specifically said the SARS credit book had “evolved” over a number of years to R66 billion. This was clearly not sustainable. He would not say that this was the result of incompetence on the part of SARS officials, but he did acknowledge – as had been done at the Nugent commission of inquiry – that there were problems at SARS. He said this money was “costing” taxpayers, money that should go back into the economy. A process of paying out this money was being developed with the aid of Treasury, Kingon reported.
Overall, a conservative Mboweni appears to be taking control of fiscal management – with the help of his advisers. His ideas of partial privatisation may not fly in the long run, such as his suggested sale of SAA or reconstruction of Eskom. It points to ideological battles with his colleagues in cabinet going ahead. Watch this space.
- Donwald Pressly is a veteran political and economics journalist.Â
